Snap announced its 1Q 2017 results this week and they failed to impress a market full of high expectations and notably, disappointed Snap investors as the stock fell 21.5% to trade at close to its IPO price at market close on 11 May 2017.

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When we wrote recently about the Snap IPO, we questioned the long-term viability of Snap as a competitor to Facebook but it appears that some of concerns have played out even sooner than we thought.

Whilst revenue rose 286% to US$149.6 million, adjusted EBITDA (earnings before tax, interest, depreciation and amortisation) rose to 102% to US$188.2 million, which did not meet analysts’ expectations. Importantly, Snap announced that it had reached 166 million daily active users, a growth rate of 36% from 1Q 2016 but only 5% growth from 4Q 2016, similar to its growth rates of 7% in 3Q 2016 and 3% in 4Q 2016.

In comparison, Facebook’s daily active user growth grew at a similar rate of 4.6% in 1Q17 from 4Q 2016 to 1.28 billion daily active users. Facebook’s photo sharing app, Instagram has added 200 million new users in just over 10 months as it added new features such as Instagram Stories. It now has more than 700 million users and over 1,000,000 advertisers on its platform.

To add salt to the wound for Snap shareholders, Snap continues to not give any guidance on the upcoming 2Q 2017 results with co-founder and CEO, Evan Spiegal only stating:

“ … we’re kind of famous for not giving guidance on the product pipeline … but we’re obviously really excited about it and we love surprising our community.”

 

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